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2.3 Rents for Restricted Units: Unit Sizes. For all Restricted Units, rents shall be limited to Affordable Rents for households of the applicable income limit in accordance with Section 2.2 and Exhibit B. The Restricted Units shall be allocated among affordability categories as set forth in Exhibit B. Notwithstanding the foregoing, no tenant qualifying for a Restricted Unit shall be denied continued occupancy of a unit in the Project because, after admission, such tenant's household income increases to exceed the qualifying limit for such Restricted Unit. A household which at initial occupancy qualifies in a particular income category shall be treated as continuing to be of such income category so long as the household's Gross Income does not exceed one hundred forty percent (140%) of the applicable income limit. In the event the Gross Income of a household that qualified at the applicable income limit at initial occupancy exceeds the applicable income limit for a unit, that unit will continue to be considered as satisfying the applicable income limit if the unit remains Rent -Restricted. In the event a tenant's household Gross Income exceeds the limits specified in this Section, Owner shall apply the rules applicable to the Project pursuant to Section 42 of the Internal Revenue Code of 1986, as amended and the federal Regulations applicable thereto. In the event of inconsistency between the provisions of this Section 2.3 and the rules applicable to the Project in connection with low- income housing tax credits, the rules applicable to low-income housing tax credits shall prevail. 2.4 Manager's Unit. Two (2) dwelling units in the Project may be used as resident manager's unit, and shall be exempt from the occupancy and rent restrictions set forth in this Agreement. 2.5 No Condominium Conversion. Owner shall not convert the Project to condominium or cooperative ownership or sell condominium or cooperative rights to the Project or any part thereof during the term of this Agreement. 2.6 Non -Discrimination; Compliance with Fair Housing Laws. 2.6.1 Preference for City of Pleasanton Residents and Employees. In order to ensure that there is an adequate supply of affordable housing within the City of Pleasanton for residents and employees of businesses within the City, to the extent permitted by law and consistent with the program regulations for funding sources used for development of the Project, Owner shall give a preference in the rental of the residential units in the Project to Eligible Households that include a member who lives or works in the City of Pleasanton. Notwithstanding the foregoing, in the event of a conflict between this provision and the provisions of Section 42 of the Internal Revenue Code of 1986, as amended, or HUD regulations applicable to the Project (including without limitation, requirements applicable to the Project due to any Section 8 rental subsidy contract), the provisions of such Section 42 and HUD regulations and requirements shall control. Owner shall comply with City's Affirmative Marketing Policies or other rental policies and procedures as they may be amended from time to time to ensure that residents and people who work in Pleasanton are provided reasonable notice and opportunity to rent units in the Project. 2.6.2 Fair Housing. Owner shall comply with state and federal fair housing laws in the marketing and rental of the units in the Project. Owner shall accept as tenants, on the same basis as all other prospective tenants, persons who are recipients of federal certificates or 6 OAK #9834-1210-2746 v4